Western powerhouses of global economy are experiencing a relative decline, while China and India are spearheading advance of emerging economies
In the 70 years since the establishment of the People's Republic of China, the nation has undergone a huge transformation: from an agriculture-based economy to the world's largest modern economy. This is one of the most important symbols of China's entry into a new era.
To compare the economic strength of different countries, the World Bank proposes that the data measured in national currencies must be converted into a common currency at purchasing power parity, not exchange rate. This is because the market or fixed exchange rate cannot bypass the effects of inherent differences relating to price levels between currencies.
Therefore, International Comparison Project results to be released next year, including PPPs and measures of GDP and its aggregates, as well as the standard of living and the material well-being of the citizens within the countries studied, will be expressed through per capita GDP measured in PPP terms.
On Oct 16, 2019, the World Bank published a paper titled Tracking GDP in PPP terms showing that rapid rise of China and India. The paper pointed out that in 2013, the size of China's GDP overtook that of the United States, which accounts for nearly 19 percent of the world's total. The paper based its computations on the international comparison project, which collects price and expenditure data from nearly 200 countries, while also focusing on the latest data and ranking of the world's 15 largest economies in terms of GDP(PPP).
By 2018, China's GDP was equivalent to 10 times what it was in 1990, while India's had grown by nearly five times. In the same year, India became the world's third-largest economy, with an economic scale greater than that of Japan.
Drawing on the World Bank database and comparing the GDP of 15 major economies using PPP(constant 2011 international dollar), in terms of the average annual growth rate, the proportion in the world total and the changes from 2000-2018, there were five main conclusions.
First, among the world's 15 major economies, there is a pronounced imbalance in economic development speed, strengthening the North-South polarization. Between 2000 and 2018, the average annual growth rate of world GDP was 3.6 percent, while that of the eight emerging economies was 6.2 percent. The rate for China was 9.2 percent, while India grew at 6.8 percent. But the average development speed of the seven developed countries stood at just 1.6 percent. The highest rate occurred in the Republic of Korea, at 3.8 percent, and the second highest in the US, at 1.9 percent.
Second, the economic growth rate imbalance has majorly reversed the pattern of economic strength between the North and the South. The share of world GDP occupied by the eight emerging economies rose from 25.48 percent in 2000 to 39.45 percent in 2018, an increase of 13.97 percent, while that of the seven major developed economies fell from 42.99 percent in 2000 to 30.06 percent in 2018, a decrease of 12.93 percent in total.
Third, China has become the main driving force for emerging economies. Between 2000 and 2018, China maintained a very high average annual growth rate of 9.2 percent, the highest among the 15 major economies. Besides, China's GDP as a share of the global economy expanded from 7.33 percent in 2000 to 18.62 percent in 2018, rising by 11.29 percent in total, or 0.63 percent per year. At this rate, by 2020, China's share of global GDP will reach about 20 percent.
Fourth, India has become the second-largest driver of emerging economies. Having maintained a high growth rate of 6.8 percent, in 2018 India significantly increased its share of world GDP to 7.71 percent, equivalent to that of China in 2000.
Fifth, the US has fallen from first place to become the world's second-largest economy, and has entered an era of decline. The US share of world GDP fell from 20.27 percent in 2000 to 15.05 percent in 2018, a decrease of 5.22 percent in total, or 0.29 percent per year on average. Behind the dip were several wars the US launched, namely the wars in Afghanistan and Iraq, airstrikes in Libya and intervention in Syria, as well as the eruption of the international financial crisis in 2008. The consequence is the continual expansion of central government debt, which increased from $1.6 trillion in 2001 to $18.5 trillion in 2016.
The US total debt reached $22 trillion in February 2019, well above the $20.5 trillion that was the equivalent figure in 2018. This is a typical illustration of the saying, "After me, the flood", meaning that each government will leave subsequent administrations with heavy debt. Moreover, unfortunately, the trade war waged by the US cannot change this declining trend.
In short, we are experiencing an era of unprecedented change. As advanced economies, most notably the US, decline, emerging economies led by China and India are advancing rapidly. The use of ICP statistics provides a more scientific basis for explaining these great changes. Against this backdrop, during his visit to India, President Xi Jinping stated that as the two largest developing countries with the two largest populations in the world, and as the representatives of all the emerging economies, China and India should not only safeguard their own development, but should work together to protect the developmental benefits of all the developing countries. Only through such cooperation in the 21st century, will Southern countries become increasingly richer and stronger.
(China Daily Global 11/04/2019 page13)